NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1. Organization and Basis of Presentation

Tower International, Inc. and its subsidiaries (collectively referred to as the “Company” or “Tower International”) is a leading integrated global manufacturer of engineered structural metal components and assemblies, primarily serving automotive original equipment manufacturers (“OEMs”), including Volkswagen Group, Ford, Chrysler, Fiat, Volvo, Nissan, Daimler, Toyota, BMW, Honda, Chery, PSA, and Geely. Products include body-structure stampings, frame and other chassis structures, as well as complex welded assemblies for small and large cars, crossovers, pickups, and sport utility vehicles (“SUVs”). Including both wholly owned subsidiaries and majority owned subsidiaries, the Company has strategically located production facilities in Brazil, the United States, Belgium, Czech Republic, Germany, Italy, Poland, Slovakia, and China, supported by engineering and sales locations in Brazil, the United States, Germany, Italy, China, India, and Japan.

The accompanying Condensed Consolidated Financial Statements have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The information furnished in the Condensed Consolidated Financial Statements includes normal recurring adjustments and reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of such financial statements. Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the rules and regulations of the SEC. Although the Company believes that the disclosures are adequate to make the information presented not misleading, these Condensed Consolidated Financial Statements should be read in conjunction with the audited year-end financial statements and the notes thereto included in the most recent Annual Report on Form 10-K filed by the Company with the SEC. The interim results for the periods presented may not be indicative of the Company’s actual annual results.

On October 14, 2010, the Company completed its initial public offering (the “IPO”), whereby Tower Automotive, LLC was converted to a Delaware corporation named Tower International, Inc.

On December 28, 2012, the Company consummated the divestiture of its South Korean subsidiary. In accordance with FASB ASC No. 205, Discontinued Operations, the results of the Company’s South Korean subsidiary are presented as discontinued operations in the Company’s Condensed Consolidated Financial Statements. See note 4 for additional information.

Principles of Consolidation

The Condensed Consolidated Financial Statements include the accounts of the Company and all subsidiaries over which the Company exercises control . All intercompany transactions and balances have been eliminated upon consolidation.

Note 2. New Accounting Pronouncements Not Yet Adopted

As of June 30, 2013, the Company has adopted all accounting pronouncements affecting the Company.

Note 3. Inventories

Inventories are stated at the lower of cost or market. Cost is determined by the first-in, first-out (“FIFO”) method. In addition, the Company uses a valuation account for inventory obsolescence, which is not material for any period presented. Maintenance, repair, and non-productive inventory, which are considered consumables, are expensed when acquired in cost of sales. Inventories consist of the following (in thousands):

Note 4. Discontinued Operations and Assets Held for Sale

On December 28, 2012, the Company’s subsidiaries, Tower Automotive Holdings Asia B.V. and Tower Automotive International Holdings B.V. (the “Sellers”), entered into a Stock Purchase Agreement (“Agreement”) with SJ Holdings, Inc., a subsidiary of SECO (“Buyer”), and consummated the divestiture of its Korean subsidiary, Seojin Industrial Company Ltd. (“Seojin”). Pursuant to the Agreement, the Buyer assumed the outstanding debt of Seojin and acquired all of the outstanding capital stock of Seojin for a purchase price of fifty billion Korean Won (approximately $47 million USD), of which the Company received 50% on December 28, 2012 and 40% on January 31, 2013. During the six months ended June 30, 2013, the Company received $18.6 million and paid transaction costs of $2.9 million in connection with the sale of Seojin. Pursuant to the terms of the Agreement, the Company expects to receive the remaining 10% in December 2013. As of June 30, 2013, the Company had a receivable recorded of approximately $4.4 million for the payments to be received in December 2013. This receivable is included in prepaid tooling, notes receivable, and other in the Condensed Consolidated Balance Sheets. Seojin has been presented as a discontinued operation in accordance with FASB ASC No. 205, Discontinued Operations.

The following table discloses selected financial information of the discontinued operation in the International segment (in thousands):

As of June 30, 2013, the Company had two locations that were considered held for sale in accordance with FASB ASC No. 360, Property, Plant, and Equipment . The two locations were Bergisch Gladbach, Germany, and Romulus, Michigan. During the second quarter of 2013 the Company reached an agreement to sell the Bergisch and Romulus facilities. The proceeds from the sale are expected to be received during the third quarter of 2013. Assets held for sale are included in prepaid tooling, notes receivable, and other.

The following table summarizes assets held for sale by category (in thousands):

Note 5. Tooling

Tooling represents costs incurred by the Company in the development of new tooling used in the manufacture of the Company’s products. All pre-production tooling costs incurred for tools that the Company will not own and that will be used in producing products supplied under long-term supply agreements are expensed as incurred unless the supply agreement provides the Company with the non-cancellable right to use the tools or the reimbursement of such costs is contractually guaranteed by the customer. Generally, the customer agrees to reimburse the Company for certain of its tooling costs at the time the customer awards a contract to the Company.

When the part for which tooling has been developed reaches a production-ready status, the Company is reimbursed by its customer for the cost of the tooling, at which time the tooling becomes the property of the customer. The Company has certain other tooling costs, which are capitalized and amortized over the life of the related product program, related to tools which the Company has the contractual right to use during the life of the supply arrangement. Customer-owned tooling is included in prepaid tooling, notes receivable, and other and company-owned tooling is included in other assets, net in the Condensed Consolidated Balance Sheets.

The components of capitalized tooling costs are as follows (in thousands):

Any gain recognized, which is defined as the excess of reimbursement over cost, is amortized over the life of the program. If estimated costs are expected to be in excess of reimbursement, a loss is recorded in the period in which the loss is estimated.

Intangibles

The Company has certain intangible assets that are related to customer relationships in Europe and Brazil. These intangible assets have definite lives and are amortized on a straight-line basis, which approximates the recognition of related revenue, over the estimated lives of the related assets. The intangible assets are recorded in other assets, net in the Condensed Consolidated Balance Sheets. The Company anticipates amortization expense of $2.8 million and $1.6 million for the years ended December 31, 2013 and 2014, respectively, at which time no further amortization expense will be incurred. The Company has incurred amortization expense of $0.7 million and $1.5 million, respectively, for the three and six months ended June 30, 2013. The Company incurred amortization expense of $1.1 million and $2.3 million, respectively, for the three and six months ended June, 2012. The following table presents information about the intangible assets of the Company at June 30, 2013 and December 31, 2012, respectively (in thousands):

Note 7. Restructuring and Asset Impairment Charges

As of June 30, 2013, the Company has executed various restructuring plans and may execute additional plans in the future to realign manufacturing capacity to prevailing global automotive production and to improve the utilization of existing facilities. Estimates of restructuring charges are based on information available at the time such charges are recorded. Due to the inherent uncertainty involved in estimating restructuring expenses, actual amounts paid for such activities may differ from amounts initially recorded. Accordingly, the Company may record revisions of previous estimates by adjusting previously established reserves.

The following table sets forth the Company’s net restructuring and asset impairment charges by type for the periods presented (in thousands):

The charges incurred during the six months ended June 30, 2013 and 2012 related primarily to the following actions:

2013 Actions

During the three and six months ended June 30, 2013, the charges incurred in the Americas segment related to the closure of Tower Defense & Aerospace, LLC (“TD&A”) (described below), the ongoing maintenance expense of facilities closed as a result of prior actions, and an impairment charge on a facility in Romulus, Michigan that the Company ceased using during the first quarter of 2013. The charges incurred in the International segment related to an impairment charge on the Bergisch facility that was classified as held for sale during the second quarter of 2013 and severance costs to reduce fixed costs.

Tower Defense & Aerospace

In April 2013, the Company’s Board determined to close the operations of TD&A. In June 2013, the Company received $9.1 million in cash proceeds for the sale of substantially all of TD&A’s assets. In connection with such closure, the Company incurred $11.5 million of restructuring charges, of which $8.2 million represents an impairment charge, $2.8 million represents other exit costs, and $0.5 million represents severance costs. The Company does not anticipate that it will incur additional restructuring charges during the third quarter of 2013. As of June 30, 2013, the Company has a liability recorded of $0.5 million related to severance costs and lease buy-outs for such closure.

2012 Actions

During the three and six months ended June 30, 2012, the charges incurred in the Americas segment related to the ongoing maintenance expense of facilities closed as a result of prior actions and the costs incurred to close a manufacturing facility and relocate the operations to one of the Company’s existing manufacturing facilities. The charges incurred in the International segment related to severance costs in Europe to reduce  fixed costs.

Except as disclosed in the table above, the Company does not anticipate incurring additional material cash charges associated with the actions described above. The increase in the liability above does not agree with the restructuring charges in the table above as certain items related to the actions described are expensed as incurred. The liability primarily relates to severance, with the exception of costs accrued resulting from the ceased use of a facility in North America during the first quarter of 2012.

The liability decreased during the first six months of 2013 primarily due to severance payments made related to prior accruals. The majority of the $2 million restructuring reserve accrued as of June 30, 2013, is expected to be paid in 2013.

During the six months ended June 30, 2013, the Company incurred payments related to prior accruals in Europe and North America of $0.9 million and $0.7 million, respectively.

Note 8. Debt

Term Loan Credit Facility

On April 23, 2013, the Company entered into a Term Loan and Guaranty Agreement (the “Term Loan Credit Agreement”) by and among Tower Automotive Holdings USA, LLC (the “Term Loan Borrower”), the Company, Tower Automotive Holdings I, LLC (“Term Loan Holdco”), Tower Automotive Holdings II(a), LLC, Tower Automotive Holdings II(b), LLC, the subsidiary guarantors named therein, the Lenders from time to time party thereto and Citibank, N.A., as administrative agent for the Lenders (the credit facility evidenced by the Term Loan Credit Agreement and related documentation, the “Term Loan Credit Facility”).

The Term Loan Credit Agreement provides for an initial term loan of $420 million and permits the Term Loan Borrower to request, subject to the satisfaction of certain conditions set forth in the Term Loan Credit Agreement (including the agreement of one or more lenders to make incremental loans, which agreement may be granted or withheld in the sole discretion of any lender), future disbursements of incremental term loans in the aggregate principal amount of up to the greater of (i) $100 million and (ii) such other amount so long as Term Loan Holdco’s pro forma Total Net Leverage Ratio (as defined in the Term Loan Credit Agreement) does not exceed 2.00:1.00. The maturity date for the initial term loan disbursed under the Term Loan Credit Agreement is April 23, 2020.

The proceeds of the initial term loan disbursed under the Term Loan Credit Agreement were used upon, and are expected to be used following, the closing of the Term Loan Credit Facility, to redeem, repurchase, or otherwise discharge all or a portion of the outstanding 10.625% Senior Secured Notes due 2017 (the “10.625% Senior Secured Notes” or the “notes”) previously issued pursuant to that certain Indenture, dated as of August 24, 2010, by and among the Term Loan Borrower and TA Holdings Finance, Inc., as issuers, the Company and certain of its direct and indirect subsidiaries as guarantors, and Wilmington Trust FSB as trustee, and to pay all accrued and unpaid interest thereon and related fees and expenses, including a tender premium, in connection with the tender offer described below.

The initial term loans made under the Term Loan Credit Agreement bear interest at (i) an alternate base rate (which is the highest of the Prime Rate, the Federal Funds Effective Rate plus 1/2% and the Adjusted LIBO Rate (as each such term is defined in the Term Loan Credit Agreement) for a one month interest period plus 1%) plus a margin of 3.50% or (ii) the Adjusted LIBO Rate (calculated by multiplying the applicable LIBOR by a statutory reserve rate, with a floor of 1.25) plus a margin of 4.50%.

The Term Loan Borrower’s obligations under the Term Loan Credit Facility are guaranteed by the Company, on an unsecured basis, and Term Loan Holdco and certain of the Company's other direct and indirect domestic subsidiaries, on a secured basis. The Term Loan Credit Facility is secured, on a pari passu basis with the notes, by the same assets of the Term Loan Borrower and certain of the Company's other direct and indirect domestic subsidiaries that secure the obligations under the notes.

The Term Loan Credit Agreement includes customary events of default and amounts due thereunder may be accelerated upon the occurrence of an event of default.

As of June 30, 2013, the outstanding principal balance of the Term Loan Credit Facility was $418 million (net of a remaining $2 million original issue discount) and the interest rate was 5.75% per annum.

Senior Secured Notes

On August 24, 2010, the Company’s subsidiaries, Tower Automotive Holdings USA, LLC and TA Holdings Finance, Inc. (collectively, the “Issuers”), issued $430 million of 10.625% Senior Secured Notes (the “notes offering”). The notes were issued at an original issue discount of $12.8 million and bear an annual interest rate of 10.625%. The original issue discount is being amortized on a straight-line basis, which approximates the effective interest method, through interest expense over the term of the notes, which increases the effective annual interest rate to 11.25%. The notes mature on September 1, 2017. The notes are jointly and severally and unconditionally guaranteed by the Company on a senior unsecured basis and by the existing domestic subsidiaries of the Company, other than the Issuers, that are guarantors under Tower Automotive Holdings USA, LLC’s existing revolving credit facility (the “Amended ABL Revolver”) (such domestic subsidiaries, the “Subsidiary Guarantors”) on a senior secured basis. The notes are senior secured obligations of the Issuers that, subject to certain permitted liens and exceptions and subject to certain limitations with respect to enforcement, rank equally in right of payment to any existing and future senior indebtedness of the Issuers and are effectively junior to the extent of the collateral securing the Issuers’ and the Subsidiary Guarantors’ obligations on a first priority basis under the Amended ABL Revolver. The notes and the subsidiary guarantees are effectively junior to any existing and future indebtedness of the Company’s subsidiaries that are not guaranteeing the notes. The notes also have covenant restrictions, including formulary limitations on the Company’s ability to pay cash dividends on its common stock.

The notes are secured, on a pari passu basis with the obligations under the Term Loan Credit Facility, by (i) a first priority security interest in certain assets of the Issuers and the Subsidiary Guarantors, other than, inter alia, accounts, chattel paper, inventory, cash, deposit accounts, securities accounts, machinery, equipment and real property and all contract rights, and records and proceeds relating to the foregoing and (ii) on a second priority basis to all other assets of the Issuers and the Subsidiary Guarantors which have been pledged on a first priority basis to the agent for the benefit of the lenders under the Amended ABL Revolver described below.

Upon the occurrence of certain specified changes of control, the holders of the notes will have the right to require the Issuers to purchase all or a part of their notes at a repurchase price equal to 101% of the principal amount of the notes, plus accrued and unpaid interest.

At any time prior to September 1, 2014, the Issuers may redeem some or all of the notes at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus a “make-whole” premium and accrued and unpaid interest. Additionally, prior to September 1, 2014, during 12-month periods described in the indenture, the Issuers may redeem up to 10% of the original principal amount of the notes at a redemption price equal to 105% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest. Further, the Issuers may redeem some or all of the notes at any time on or after September 1, 2014 at a redemption price equal to 105.313% of the principal amount of the notes to be redeemed through September 1, 2015, at any time on or after September 1, 2015 at a redemption price equal to 102.656% of the principal amount of the notes to be redeemed through September 1, 2016, and at 100% of the principal amount thereafter, plus accrued and unpaid interest. In addition, prior to September 1, 2013, the Issuers may redeem up to 35% of the original principal amount of the notes from the proceeds of certain equity offerings at a price of 110.625% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest. The Company has concluded that bifurcation is not required for the embedded derivative related to the redemption provisions of the notes as it is clearly and closely related to the debt instrument or is not material.

On April 23, 2013, the Company completed a cash tender offer (the “Tender Offer”) to purchase up to $276 million of the outstanding notes. An aggregate principal amount of $362 million of the notes was validly tendered in the Tender Offer and not validly withdrawn. The Company accepted for purchase $276 million in aggregate principal amount of the notes at an aggregate purchase price of 113.58% of the principal amount thereof plus accrued and unpaid interest, which resulted in a premium paid of $37.5 million and a tender fee of $0.7 million that were recognized as other expense. Because the maximum aggregate principal amount of $276 million for the notes was exceeded, the Company did not accept all of the notes tendered for purchase. The notes that were tendered but not accepted were promptly returned to the tendering parties. In connection with such repurchase, the Company accelerated the amortization of the original issue discount by $5.2 million and associated debt issue costs by $3.1 million in the second quarter of 2013. The accelerated amortization of the original issue discount and associated debt issue costs are recorded in the Condensed Consolidated Statement of Operations as interest expense.

On May 24, 2013, the Company redeemed $43 million of the notes at 105% of the principal amount thereof, plus accrued and unpaid interest, which resulted in a premium paid of $2.2 million that was recognized as other expense. In connection with the redemption, the Company accelerated the amortization of the original issue discount by $0.8 million and associated debt issue costs by $0.5 million in the second quarter of 2013. The Company intends to redeem all of the remaining outstanding notes, which as of June 30, 2013, had an outstanding principal balance of $42.2 million (net of a remaining $0.8 million original issue discount), at a redemption price of 105% of the principal amount thereof, plus accrued and unpaid interest, during the third quarter of 2013. Per the Term Loan Credit Agreement, the Company placed $45.2 million into an escrow account to cover this expected third quarter 2013 redemption and associated premium. This cash has been presented as restricted cash in the Condensed Consolidated Balance Sheet. On July 10, 2013, the Issuers, in accordance with the Indenture, delivered notice to the noteholders that such redemption would occur on August 26, 2013.

Amended Revolving Credit Facility

On June 19, 2013, the Company entered into a Second Amended and Restated Revolving Credit and Guaranty Agreement (the “Amended Revolving Credit Facility Agreement”) by and among Tower Automotive Holdings USA, LLC (the “Borrower”), the Company, Tower Automotive Holdings I, LLC (“Holdco”), Tower Automotive Holdings II(a), LLC, Tower Automotive Holdings II(b), LLC, the subsidiary guarantors named therein, JPMorgan Chase Bank, N.A., Wells Fargo Capital Finance, LLC and each of the other financial institutions from time to time party thereto, as Lenders and JPMorgan Chase Bank, N.A., as Issuing Lender, as Swing Line Lender and as Administrative Agent (in such capacity, the “Agent”) for the Lenders.

The Amended Revolving Credit Facility Agreement amended and restated in, its entirety, the Amended and Restated Revolving Credit and Guaranty Agreement, dated as of June 13, 2011, by and among the Borrower, its domestic affiliate, and domestic subsidiary guarantors, named therein, and the lenders party thereto, and the Agent. The Amended Revolving Credit Facility Agreement provides for an asset-based revolving credit facility (the “Amended ABL Revolver”) in the aggregate amount of up to $150 million, subject to a borrowing base limitation. The maturity date for the Amended ABL Revolver is June 19, 2018.

Advances under the Amended ABL Revolver will bear interest at an alternate base rate (which is the highest of the Prime Rate, the Federal Funds Rate plus 0.50% and the Adjusted LIBOR Rate (as each such term is defined in the Amended Revolving Credit Facility Agreement) for a one month interest period plus 1%) plus a base rate margin or LIBOR plus a Eurodollar margin. The applicable margins are determined by the average availability under the Amended ABL Revolver over the preceding three consecutive full calendar months and as of the date of the Amended Revolving Credit Facility Agreement were 1.00% per annum and 2.00% per annum for base rate and LIBOR based borrowings, respectively.

The Amended Revolving Credit Facility is guaranteed by the Company, on an unsecured basis, and certain of the Company’s direct and indirect domestic subsidiaries, on a secured basis. The Amended Revolving Credit Facility is secured by the same assets of the Borrower and the subsidiary guarantors that secured the obligations under the prior ABL revolving facility. The Borrower’s and each subsidiary guarantor’s pledge of such assets as security for the obligations under the Amended Revolving Credit Facility is evidenced by a Second Amended and Restated ABL Security Agreement dated as of June 19, 2013 among the Borrower, the guarantors party thereto and the Agent.

The Amended Revolving Credit Facility Agreement contains customary covenants applicable to certain of the Company’s subsidiaries and includes customary events of default and amounts due thereunder may be accelerated upon the occurrence of an event of default.

In connection with the Amended Revolving Credit Facility Agreement, the Company paid debt issue costs of $1.7 million and accelerated the amortization of the debt issue costs associated with the Amended and Restated Revolving Credit and Guaranty Agreement by $0.3 million in the second quarter of 2013. These costs are recorded in the Condensed Consolidated Statement of Operations as interest expense.

As of June 30, 2013, there was $135.6 million of borrowing availability under the Amended ABL Revolver, of which $35 million of borrowings were outstanding and $11.5 million of letters of credit were outstanding. As of June 30, 2013, the applicable margins were 1.25% per annum and 2.25% per annum for base rate and LIBOR based borrowings, respectively, resulting in a weighted average interest rate of 2.25% per annum.

Letter of Credit Facility

On June 13, 2011, the Company entered into a Letter of Credit Facility Agreement dated as of June 13, 2011 (the “Letter of Credit Facility Agreement”) by and among Tower Automotive Holdings USA, LLC (the “L/C Borrower”), the Company, JPMorgan Chase Bank, N.A., in its capacity as participant in respect of letters of credit issued thereunder, and JPMorgan Chase Bank, N.A., as Administrative Agent and Issuing Lender.

The Letter of Credit Facility Agreement originally provided for a letter of credit facility (the “Letter of Credit Facility”) for the issuance of up to $38 million of letters of credit with a sublimit for Euro dominated letters of credit (with an option to increase the Letter of Credit Facility to $44.5 million in the future). Upon a third party drawing on letters of credit issued under the Letter of Credit Facility, the L/C Borrower will become obligated to pay to the lenders the amounts so drawn. The maturity date of the Letter of Credit Facility is June 13, 2014.

The Company has amended the Letter of Credit Facility Agreement to reduce the Letter of Credit Facility on multiple occasions. In addition, on April 22, 2013, the Company amended the Letter of Credit Facility Agreement to, among other things, permit the incurrence of up to $430 million of indebtedness under the Term Loan Credit Agreement and the granting of liens to secure such indebtedness. On June 20, 2013, the Company amended the Letter of Credit Facility Agreement to reduce the Letter of Credit Facility from $22.5 million to $8.5 million (with an option to increase the Letter of Credit Facility to $44.5 million in the future). In connection with the reduction of the Letter of Credit Facility, the Company incurred a breakage fee of $0.6 million in the second quarter of 2013. This fee is recorded in the Condensed Consolidated Statement of Operations as other expense. The remaining terms of the Letter of Credit Facility Agreement have remained the same.

As of June 30, 2013, the outstanding letters of credit under the Letter of Credit Facility were $8.1 million. As of June 30, 2013, an 8.5% per annum fee is due on the total amount of the facility. This fee is subject to change in the future based upon then current market conditions.

The Letter of Credit Facility is guaranteed by the Company and certain of the Company’s direct and indirect domestic subsidiaries on an unsecured basis pursuant to a Guaranty entered into and made on June 13, 2011.

The Letter of Credit Facility is unsecured. The Letter of Credit Facility Agreement contains customary covenants applicable to certain of the Company's subsidiaries. The Letter of Credit Facility Agreement includes customary events of default and amounts due thereunder may be accelerated upon the occurrence of an event of default.

Detroit Investment Fund

The Company assumed an unsecured debt instrument of $1 million owed to the Detroit Investment Fund, L.P. upon the acquisition of substantially all of the assets of W Industries, Inc. in April 2011. The debt instrument required monthly principal and interest payments at an annual interest rate of 8.5%. During the second quarter of 2013, the remaining balance on the debt instrument was repaid in full. As of June 30, 2013, no balance remained outstanding.

Debt Issue Costs

The Company incurred interest expense related to the amortization of debt issue costs of $4.4 million and $4.9 million during the three and six months ended June 30, 2013, respectively. The Company incurred interest expense related to the amortization of debt issue costs of $0.5 million and $1 million during the three and six months ended June 30, 2012, respectively.

Foreign Subsidiary Indebtedness

As of June 30, 2013, the Company had foreign subsidiary indebtedness of $96.2 million, which consisted primarily of borrowings in Europe of $29.1 million, borrowings in Brazil of $28.6 million, receivables factoring in Europe of $22.5 million, and borrowings in China of $16 million.

The change in foreign subsidiary indebtedness from December 31, 2012 to June 30, 2013 is explained by the following (in thousands):

Generally, borrowings of foreign subsidiaries are made under credit agreements with commercial lenders and are used to fund working capital and other operating requirements.

Europe

As of June 30, 2013, the receivables factoring facilities balance available to the Company was $22.5 million (€17.3 million), of which the entire amount was drawn. The facilities are uncommitted, demand facilities which are subject to termination at the discretion of the banks and bear interest rates based on the average three month EURIBOR plus a spread ranging from 2.15% to 4.13%. The effective annual interest rates as of June 30, 2013 ranged from 2.36% to 3.96%, with a weighted average interest rate of 3.04% per annum. Any receivables factoring under these facilities is with recourse and is secured by the accounts receivable factored. The receivables factoring transactions are recorded in the Company’s Condensed Consolidated Balance Sheets in short-term debt and current maturities of capital lease obligations.

As of June 30, 2013, the secured lines of credit balance available to the Company was $38.3 million (€29.4 million) , of which $29.1 million (€22.4 million) was outstanding . The facilities bear an interest rate based on the EURIBOR plus a spread ranging from 2.9% to 4.0% and have maturity dates ranging from October 2013 to April 2015 . The effective annual interest rate as of June 30, 2013 was 4.17% per annum. The facilities are secured by certain accounts receivable related to customer funded tooling, mortgages over the land, certain buildings, and other assets and are subject to negotiated prepayments upon the receipt of funds from completed customer projects.

Brazil

As of June 30, 2013, the Company’s Brazilian subsidiary had borrowings of $28.6 million (R$63.7 million) which have annual interest rates ranging from 3% to 14.31% and maturity dates ranging from July 2013 to July 2022. As of June 30, 2013, the weighted average interest rate on the borrowings in Brazil was 10.78% per annum. The loans are provided through bilateral agreements with four local banks and are secured by certain fixed and current assets. Periodic interest and principal payments are required.

During the second quarter of 2013, the Company obtained two term loans with aggregate indebtedness of $10.3 million (R$23 million). One term loan of $9 million (R$20 million) has a maturity date of June 2015 and bears an interest rate of 13.41% per annum. The other term loan of $1.3 million (R$3 million) has a maturity date of February 2018 and bears an interest rate of 3% per annum.

China

As of June 30, 2013, the fixed rate secured lines of credit balance available to the Company was $10.3 million (Rmb 63.8 million), of which the entire amount was outstanding. The credit lines have maturity dates ranging from July 2013 to December 2017 and bear interest rates ranging from 6.44% to 7.68%. As of June 30, 2013, the variable rate secured line of credit balance available to the Company was $5.7 million (Rmb 35 million) , of which the entire amount was outstanding . The credit line matures in June 2015. The fixed rate and variable rate secured lines of credit facilities are secured by machinery, equipment, and land rights. The effective annual interest rate on these facilities as of June 30, 2013 was 7.27%.

Covenants

As of June 30, 2013, the Company was in compliance with all financial covenants that govern its credit agreements.

Capital Leases

The Company had capital lease obligations of $11.2 million and $12.5 million as of June 30, 2013 and December 31, 2012, respectively. Of these amounts, $1.2 million and $1.7 million represent the current maturities as of June 30, 2013 and December 31, 2012, respectively. As of June 30, 2013, the Company’s capital lease obligations are scheduled to expire in March 2018.

Note 9. Income Taxes

The Company recognized total income tax expense of $3.6 million and $7.1 million during the three months and six months ended June 30, 2013, respectively. Income tax expense is primarily the result of profitable foreign entities.

During the three months and six months ended June 30, 2012, the Company recognized income tax expense of $12.5 million and $14.7 million, respectively. The income tax expense in the second quarter of 2012 included a non-cash charge of $6.5 million for the recording of a valuation allowance on the Company’s deferred tax assets in Brazil. The remaining income tax expense during the three and six months ended June 30, 2012 resulted primarily from the recognition of foreign income taxes and withholding taxes.

The income tax expense is higher than the expected income tax expense based on statutory rates primarily because the Company does not record tax benefits or expense in certain jurisdictions, primarily the U.S. and Netherlands, which have had historical cumulative losses. The Company did not record an income tax benefit on these historical losses due to the uncertainty of future realization of the deferred tax assets generated by the cumulative losses.

Note 10. Retirement Plans

The Company sponsors various pension and other postretirement benefit plans for its employees.

The Tower International Consolidated Pension Plan (the “Pension Plan”) provides benefits for certain current and former U.S. employees. Benefits under the Pension Plan are based on years of service and compensation, among other factors. Effective October 1, 2006, the Pension Plan was frozen and ceased accruing any additional benefits. Contributions made by the Company are intended to fund benefits that accrued through October 1, 2006.

The Company sponsors various qualified defined contribution retirement plans. Each plan serves a defined group of employees and has varying levels of Company contributions. The Company’s contributions to certain plans may be required by the terms of the Company’s collective bargaining agreements.

The following tables provide the components of net periodic pension benefit cost and other post-retirement benefit cost (in thousands):

The Company expects its minimum pension funding requirements to be $15.1 million during 2013. The Company made contributions of $3.4 million and $6.4 million, respectively, to the Pension Plan during the three and six months ended June 30, 2013.

Additionally, the Company contributed $1.2 million and $2.3 million, respectively, to its defined contribution retirement plans during the three and six months ended June 30, 2013.

The following table presents the components of accumulated other comprehensive loss (in thousands):

The following table presents the changes in accumulated other comprehensive l oss by component for the three months ended June 30, 2013 (in thousands):

The following table presents the changes in accumulated other comprehensive l oss by component for the six months ended June 30, 2013 (in thousands):

Note 12. Earnings per Share (“EPS”)

Basic earnings / (loss) per share is calculated by dividing the net income / (loss) attributable to Tower International, Inc. by the weighted-average number of common shares outstanding.

The share count for diluted earnings / (loss) per share is computed on the basis of the weighted-average number of common shares outstanding plus the effects of dilutive common stock equivalents (“CSEs”) outstanding during the period.  CSEs, which are securities that may entitle the holder to obtain common stock, include outstanding stock options and restricted stock units.  When the average price of the common stock during the period exceeds the exercise price of a stock option, the options are considered potentially dilutive CSEs. When there is a loss from continuing operations, potentially dilutive shares are excluded from the computation of earnings per share as their effect would be anti-dilutive.

As the average price of the common stock during each period presented did not exceed the exercise price of certain stock options, the Company excluded 1.5 million of potentially anti-dilutive shares for the three and six months ended June 30, 2013. The Company excluded 1 million of potentially anti-dilutive shares for the three and six months ended June 30, 2012.

A summary of information used to compute basic and diluted net income / (loss) per share attributable to Tower International, Inc. is shown below (amounts in thousands – except share and per share amounts):

Note 13. Share-Based and Long-Term Compensation

2010 Equity Incentive Plan

The Company adopted an equity incentive plan in connection with the IPO that allows for the grants of stock options, restricted stock awards, other equity-based awards, and certain cash-based awards to be made pursuant to the plan. The eligibility requirements and terms governing the allocation of any common stock and the receipt of other consideration under the 2010 Equity Incentive Plan are determined by the Board of Directors and/or its Compensation Committee. The number of shares of common stock that may be issued or delivered may not exceed, in the aggregate, 4.6 million shares. Cash settled awards do not count against the maximum aggregate number.

The primary objectives of the Company’s compensation programs are to (i) attract, motivate and retain the best executive officers with the skills necessary to successfully manage the business and (ii) align the interests of the executive officers with stockholders by rewarding them for strong Company performance.

Share-Based Compensation

At June 30, 2013, 1,143,348 shares were available for future grants of options and other types of awards under the 2010 Equity Incentive Plan. Forfeited shares may be re-issued under the plan up to the maximum amount to be issued as defined by the plan.

The following table summarizes the Company’s award activity during the six months ended June 30, 2013:

Stock options  — The exercise price of each stock option equals the market price of the Company’s common stock on the date of grant. Compensation expense is recorded based on the fair value at the grant date and is recognized on a straight-line basis over the applicable vesting periods . The Company’s stock options generally vest over three years with a maximum term of ten years.

During the three and six months ended June 30, 2013, the Company recognized an expense of $0.5 million and $1 million, respectively, relating to the options. During the three and six months ended June 30, 2012, the Company recognized an expense of $0.4 million and $0.7 million, respectively, relating to the options. The Company did not recognize any tax benefit related to this compensation expense. As of June 30, 2013, the Company has $2.4 million of unrecognized compensation expense associated with these stock options that will be amortized on a straight-line basis over the next 16 months on a weighted average basis.

As of June 30, 2013, the Company has an aggregate of 811,211 stock options that have been granted but have not yet been exercised. As of June 30, 2013, the remaining average contractual life for the options is approximately 8.25 years. During the six months ended June 30, 2013, 122,625 stock options were exercised and 39,909 stock options were forfeited.

Restricted stock units (“RSUs”) — The grant date fair value of each RSU equals the market price of the Company’s common stock on the date of grant. Compensation expense is recorded based on the fair value at the grant date, less an estimated forfeiture amount, and is recognized on a straight-line basis over the applicable vesting periods.

During the three and six months ended June 30, 2013 , the Company recognized an expense of $0.7 million and $1.4 million, respectively, relating to all of the RSUs granted thus far, excluding the RSUs granted in connection with the Company’s IPO. During the three and six months ended June 30, 2012 , the Company recognized an expense of $0.7 million and $1.3 million, respectively, relating to these RSUs. The Company did not recognize any tax benefit related to this compensation expense. As of June 30, 2013, the Company has $3.6 million of unrecognized compensation expense associated with these RSUs that will be amortized on a straight-line basis over the next 20 months on a weighted average basis. The Company’s RSUs generally vest over a three year period .

During the three and six months ended June 30, 2012, the Company recognized an expense of $2.1 million and $5.5 million, respectively, relating to the RSUs granted in connection with the Company’s IPO. The Company did not recognize any expense related to these RSUs during the three and six months ended June 30, 2013 because all compensation expense associated with these RSUs had been recorded as of April 30, 2012. The Company did not recognize any tax benefit related to this compensation expense.

As of June 30, 2013, the Company has an aggregate of 725,117 RSUs that have been granted but have not yet vested. In addition, 9,029 RSUs were forfeited during the six months ended June 30, 2013.

On March 1, 2012, one third of the RSUs granted on March 3, 2011 vested, resulting in the issuance of 31,878 shares at a fair value of $0.4 million. After offsets for withholding taxes, a total of 25,384 shares of common stock were issued in connection with this vesting.  This total is net of shares repurchased to provide payment for certain executives’ minimum statutory withholding tax. The Company paid $0.1 million to acquire 6,494 vested shares to cover the minimum statutory withholding taxes.

On April 20, 2012, the second half of the RSUs granted at the time of the Company's IPO vested, resulting in the issuance of 814,035 shares at a fair value of $9.1 million. After offsets for withholding taxes, a total of 537,970 shares of common stock were issued in connection with this vesting.  This total is net of shares repurchased to provide payment for the employee’s minimum statutory withholding tax. The Company paid $3.1 million to acquire 276,065 vested shares to cover the minimum statutory withholding taxes.

On March 1, 2013, one third of the RSUs granted on March 3, 2011 vested, resulting in the issuance of 26,837 shares at a fair value of $0.3 million. After offsets for withholding taxes, a total of 17,934 shares of common stock were issued in connection with this vesting.  This total is net of shares repurchased to provide payment for certain executives’ minimum statutory withholding tax. The Company paid $0.1 million to acquire 8,903 vested shares to cover the minimum statutory withholding taxes.

On March 6, 2013, one third of the RSUs granted on March 6, 2012 vested resulting in the issuance of 40,305 shares at a fair value of $0.5 million. After offsets for withholding taxes, a total of 27,164 shares of common stock were issued in connection with this vesting.  This total is net of shares repurchased to provide payment for certain executives’ minimum statutory withholding tax. The Company paid $0.2 million to acquire 13,141 vested shares to cover the minimum statutory withholding taxes.

Long-Term Compensation

Performance Award Agreements

On March 5, 2013, the Company granted certain awards pursuant to Performance Award Agreements to approximately 80 executives under the provisions of the 2010 Equity Incentive Plan. The purpose of the awards is to provide the executives an incentive to participate in the long-term success and growth of the Company. The Performance Award Agreements provide for cash-based awards that vest upon payment, which will be paid after December 31, 2015, if certain performance conditions are met. These awards are also subject to payment upon a change in control or termination of employment, if certain criteria are met. 50% of the awards will be based on the Company's Adjusted EPS Growth Rate, which is defined as the Company’s cumulative Adjusted EPS for the period of January 1, 2013 through December 31, 2015 (the "Performance Period") , stated in terms of a percentage growth rate . The Company's earnings per share will be adjusted to exclude the effect of extraordinary, unusual, and/or nonrecurring items and then will be divided by the number of fiscal years in the specified period, stated in terms of a percentage growth rate.  The remaining 50% of the awards will be based on the Company's percentile ranking of total shareholder return compared to a peer group of companies ("TSR Percentile") for the Performance Period. The awards represent unfunded, unsecured obligations of the Company. During the three and six months ended June 30, 2013, the Company recorded an expense of $0.3 million and $0.4 million, respectively, related to these awards.

Supplemental Value Creation Program

The Supplemental Value Creation Program was created in 2010 and provided a $7.5 million cash bonus to approximately 70 executives, subject to vesting requirements of nine and 18 months, upon the retirement of the Company’s first lien term loan in full. The Company began recording a liability related to this Program in August 2010 when the first lien term loan was retired. The Company did not record an expense related to this program during the three months ended June 30, 2012; however, the Company recorded an expense of $0.7 million during the six months ended June 30, 2012. The Company paid $3.1 million upon the 18 month vesting of this Program during the first quarter of 2012. There was no remaining liability as of June 30, 2012.

Note 14. Segment Information

The Company defines its operating segments as components of its business where separate financial information is available. The Company’s operating segments are routinely evaluated by management. The Company’s chief operating decision maker (“CODM”) is the Chief Executive Officer.

The Company produces engineered structural metal components and assemblies primarily serving the global automotive industry. The Company’s operations have similar economic characteristics and share fundamental characteristics, including the nature of the products, production processes, customers, and distribution channels. The Company’s products include body structures stampings, chassis structures (including frames), and complex welded assemblies for small and large cars, crossovers, pickups, and SUVs. The Company is comprised of four operating segments: Europe, Asia, North America, and South America. These operating segments are aggregated into two reportable segments. The International segment consists of Europe and Asia while the Americas segment consists of North and South America.

The Company measures segment operating performance based on Adjusted EBITDA. The Company uses segment Adjusted EBITDA as the basis for the CODM to evaluate the performance of each of the Company’s reportable segments.

The following is a summary of selected data for each of the Company’s reportable segments (in thousands):

Inter-segment sales are not significant for any period presented. Capital expenditures do not equal cash disbursed for purchases of property, plant, and equipment as presented in the accompanying Condensed Consolidated Statements of Cash Flows, as capital expenditures above include amounts paid and accrued during the periods presented.

The following is a reconciliation of Adjusted EBITDA to income / (loss) before provision for income taxes (in thousands):

Note 15. Fair Value of Financial Instruments

FASB ASC No. 820, Fair Value Measurements, clarifies the definition of fair value as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date (an exit price). The exit price is based on the amount that the holder of the asset or liability would receive or need to pay in an actual transaction or in a hypothetical transaction if an actual transaction does not exist, at the measurement date. In some circumstances, the entry and exit price may be the same; however, they are conceptually different

Fair value is generally determined based on quoted market prices in active markets for identical assets or liabilities. If quoted market prices are not available, the Company uses valuation techniques that place greater reliance on observable inputs and less reliance on unobservable inputs. In measuring fair value, we may make adjustments for risks and uncertainties, if a market participant would include such an adjustment in its pricing.

FASB ASC No. 820 establishes a fair value hierarchy that distinguishes between assumptions based on market data, referred to as observable inputs, and our assumptions, referred to as unobservable inputs. Determining where an asset or liability falls within that hierarchy depends on the lowest level input that is significant to the fair value measurement as a whole. An adjustment to the pricing method used within either Level 1 or Level 2 inputs could generate a fair value measurement that effectively falls in a lower level in the hierarchy. The hierarchy consists of three broad levels as follows:

Level 1: Quoted market prices in active markets for identical assets and liabilities;

Level 2: Inputs other than Level 1 inputs that are either directly or indirectly observable; and

Level 3: Unobservable inputs developed using internal estimates and assumptions, which reflect those that market participants would use.

At June 30, 2013, the carrying value and estimated fair value of the Company’s total debt was $591.4 million and $599.5 million, respectively. At December 31, 2012, the carrying value and estimated fair value of the Company’s total debt was $484.5 million and $592.1 million, respectively. The majority of the Company’s debt at June 30, 2013 is comprised of the Term Loan Credit Facility and has the ability to be traded between financial institutions. Accordingly, this debt has been classified as Level 2. The fair value was determined based on the quoted market values. The majority of the Company’s debt at December 31, 2012 was traded in the market and was classified as a Level 2 measurement based on the pricing methodology and the limited trading of the securities. The fair value was determined based on the quoted market values. The remainder of the Company’s debt, primarily consisting of foreign subsidiaries’ debt, is asset-backed and is classified as Level 3. As this debt carries variable rates and minimal credit risk, the book value approximates the fair value for this debt.

The Company has foreign exchange hedges that were measured at fair value on a recurring basis at June 30, 2013 and December 31, 2012. The fair value of the hedges was immaterial for all periods presented. These derivative financial instruments are recorded in accrued liabilities and are all classified as Level 2 measurements determined using significant other observable inputs. We engage in foreign exchange hedges to limit exposure on foreign currency related to certain intercompany payments. These foreign exchange hedges have an immaterial impact on the Condensed Consolidated Financial Statements for the periods presented.

The following table provides each major category of assets and liabilities measured at fair value on a nonrecurring basis during the six months ended June 30, 2013 (in millions):

In accordance with FASB ASC No. 360, Property, Plant, & Equipment, long-lived assets held for sale with a carrying amount of $5.1 million were written down to their fair value of $2.9 million, resulting in a loss of $2.2 million, which was included in the Company’s Condensed Consolidated Statement of Operations for the six months ended June 30, 2013. Fair value of the assets was determined using a third party appraisal based on current market conditions.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and accruals approximate fair value because of the short maturity of these instruments.

Note 16. Joint Ventures and Equity in Earnings of Joint Ventures

Ningbo Joint Venture

In February 2012, a foreign subsidiary of the Company reached an agreement with Ningbo Beilun Ditong Auto Parts Co., Ltd. (a subsidiary of Ditong Automotive Products Co., Ltd.) and Zhejiang Jirun Automobile Co. Ltd. (a subsidiary of Geely Automobile Co., Ltd.) to form a joint venture (“Ningbo”) located in Ningbo, China. At inception, the joint venture partners contributed a facility and associated land rights located in Ningbo, China in exchange for 64% ownership, which resulted in a $12.1 million noncontrolling interest for the Company .

During the second quarter of 2013, the Company reached an agreement with the parties to the Ningbo joint venture, whereby the Company agreed to acquire an additional 6% equity interest in Ningbo for $0.8 million. In addition, certain other agreements were modified which resulted in the Company no longer having the ability to exert control over the operating and financial affairs of the Ningbo joint venture. Accordingly, the financial results of Ningbo are no longer consolidated within the Company's financial statements; rather, the Company's proportionate share of the earnings of the joint venture have been presented as equity in earnings of joint ventures, net of tax, in the Condensed Consolidated Statement of Operations. During the three months ended June 30, 2013, in connection with the de-consolidation, the Company recognized a gain of $1.5 million in accordance with FASB ASC No. 810,  Consolidation , which is recorded in cost of sales. The Company also incurred direct costs of $0.4 million in relation to the revised agreements, which have been recorded in selling, general, and administrative expenses. The Company’s investment in the Ningbo joint venture was $8.1 million at June 30, 2013. This investment is presented within other assets, net in the Company’s Condensed Consolidated Balance Sheets as of June 30, 2013.

Xiangtan Joint Venture

In July 2011, a foreign subsidiary of the Company reached an agreement with Xiangtan Ditong Automotive Industrial Machinery Co., Ltd. (“DIT”) to form a joint venture in which the Company exercises control that was approved by the Chinese government in September 2011. At inception, the joint venture partner contributed its facility located in Xiangtan, Hunan Province, China in exchange for 50% ownership, which resulted in a $5.9 million noncontrolling interest. As part of the original transaction, the Company contributed additional capital to the joint venture in March 2012 resulting in an accumulated ownership of 51%. The joint venture is included in the Company’s Condensed Consolidated Financial Statements because the Company exercises control.

Note 17. Commitments and Contingencies

Environmental Matters

The Company owns properties which have been impacted by environmental releases. The Company is actively involved in investigation and/or remediation at several of these locations. Total costs and liabilities associated with environmental contamination could be substantial and may have a significant impact on the Company’s financial condition, results of operations, or cash flows.

Accruals for environmental matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. The established liability for environmental matters is based upon management’s best estimates of expected investigation/ remediation costs related to environmental contamination. It is possible that actual costs associated with these matters will exceed the environmental reserves established by the Company. Inherent uncertainties exist in the estimates, primarily due to unknown environmental conditions, changing governmental regulations, and legal standards regarding liability and evolving technologies for handling site remediation and restoration. At June 30, 2013 and December 31, 2012, the Company had accrued $2.3 million for environmental matters.

Contingent Matters

The Company will establish reserves for matters in which losses are probable and can be reasonably estimated. These types of matters may involve additional claims that, if granted, could require the Company to pay penalties or make other expenditures in amounts that will not be estimable at the time of discovery of the matter. In these cases, a liability will be recorded at the low end of the range if no amount within the range is a better estimate in accordance with FASB ASC No. 450, Accounting for Contingencies .

The Company has been subject to various governmental audits in Brazil.  As of June 30, 2013, the Company has a remaining liability recorded of $2.1 million and may be required to pay up to $5 million.  To the extent that future payments are required above the amount recorded as a liability, the payments will be expensed.

Litigation

The Company is subject to various legal actions and claims incidental to its business, including potential lawsuits with customers or suppliers. Litigation is subject to many uncertainties and the outcome of individual litigated matters is not probable or estimable. After discussions with counsel litigating these matters, it is the opinion of management that the outcome of such matters will not have a material impact on the Company’s financial position, results of operations, or cash flows.